Ladies and gentlemen, thank you for standing by. I'm Vasilios, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the third quarter 2026 financial results. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Mylonas, you may now proceed.
Good evening, everyone, and good morning for those joining from the U.S. Welcome to our Third Quarter Financial Results Call. I'm joined by Christos Christodoulou, Group CFO, Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to Q&A. Let's begin. The Greek economy maintained its solid growth momentum in the third quarter of 2026, despite renewed geopolitical uncertainty and increased financial market volatility worldwide. Available data remains consistent with GDP growth of around 2% for 2026, underpinned by robust investment activity, resilient private consumption, and a solid export performance from both tourism and goods. The euro area has also provided more resilience than initially anticipated, providing a relatively supportive external backdrop for Greece. It is important to note the high quality of the growth mix, with investment increasingly taking center stage.
Indeed, fixed capital formation has been the most consistent driver of activity, in line with the record corporate profitability and an attractive investment environment. Fixed capital formation is approaching the 20% of GDP mark for 2026. It is also important to note that Greece's investment proposition has attracted significant private sector financing. Over and above record-breaking corporate lending by the banking sector, financing raised through domestic capital markets in the nine months 2026 more than doubled relative to the medium-term annual average. Foreign direct investment has also remained robust. FDI flows in eight months 2026 are set to have another record year. Household fundamentals are also continuing to improve and are supported by targeted government measures to households vulnerable to the inflationary shock. Indeed, disposable income for the economy as a whole continues to rise, while the unemployment rate declined to close to its 2008 historical low.
Moreover, household wealth is rising rapidly, led by residential house price appreciation and with increasing diversification towards financial investment products. All the above are reflected in rising demand for bank credit by households. Indeed, new mortgage and consumer loan disbursements are up by 50% year-on-year in the nine months, a 13-year high, and we also have strong demand for mutual fund products. Greece's fiscal performance remains another important source of strength. The primary surplus is expected to be 3.5% of GDP in 2026, even following the above-mentioned use of fiscal space, which amounts to about 1.5% of GDP, crucially among the most generous in the euro area in a pre-election period. Moreover, the debt-to-GDP ratio is expected to decline to 135% of GDP by end 2026, down approximately 75 percentage points during just the past six years, leading, of course, to concomitant rating upgrades.
Regarding the RRF, implementation is moving into a more CapEx-intensive phase. More than EUR 15 billion of RRF resources are set to flow into the real economy over the coming quarters, increasingly complemented by bank financing. Overall, the combination of steady growth, strong investment momentum, improving household and corporate fundamentals, fiscal credibility, and substantial still-to-be-deployed EU and market funding resources reinforce the resilience of the Greek economy and provide a supportive backdrop for banking activity. Now let me turn to our financial results. Capitalizing on Greece's remarkable economic resilience to the persistent geopolitical uncertainty, as well as the strength of our business model and our disciplined execution across strategic priorities, we delivered another solid set of results in the nine months of 2026. These results reinforce our confidence in delivering a full-year 2026 performance, overperforming on multiple important metrics.
Notably, in the nine months, we delivered a profit after tax of EUR 1 billion. Earnings per share over the same period stood at EUR 1.48, already exceeding our full-year guidance for an EPS of over EUR 1.40. Our return on tangible equity of 15.7% already compares favorably to our revised full-year 2026 guidance of over 15%. Importantly, adjusted for excess capital, return on tangible equity is close to 21%. The growth drivers in the third quarter arise from strong core income dynamics, specifically an acceleration of NII and a double-digit growth in fees. Drilling down on our NII, it increased by 6% quarter-on-quarter in the third quarter, aided by higher benchmark rates, as well as healthy loan volume growth of 13% year-on-year.
Note that the NII's upward trajectory has strong tailwinds going into the fourth quarter, implying that our full-year outcome will exceed our guidance of mid-single-digit increase. These positive tailwinds arise from, one, a positive forward rate path, two, continued lagged asset side repricing, and three, seasonally strong credit dynamics in the fourth quarter. Importantly, our quarterly NIM also moved sharply higher, up by 15 basis points quarter-on-quarter, reaching 288 basis points, well above our full-year guidance of over 280 basis points. Fees were flat quarter-on-quarter, but still up in the double digits year-on-year, with the former reflecting base effects from the large amount of RRF approvals leading up to the program's end in the previous quarter. Please note that fees will regain momentum on a quarterly basis in Q4.
As regards credit expansion, nine-month loan disbursements came in higher by nearly 30% year-on-year, mainly reflecting demand from large corporates and structured finance transactions. Net credit growth remained strong at 13% year-on-year, despite third-quarter seasonality and high corporate early repayments. Nevertheless, looking into the fourth quarter and factoring our strong pipeline of approved, not yet disbursed corporate credit, I am confident that new production will accelerate in fourth quarter, as is traditionally the case, leading full-year 2026 performing loan expansion to our guidance of over EUR 3 billion. Our deposit franchise remains a key competitive advantage. It is important to note that deposit growth so far this year has been driven by our low-cost transactional household savings accounts rather than more expensive corporate deposits. Thus, our deposit cost remains the lowest in Greece due to the superior mix and has been relatively unaffected by rising rates.
As regards our operating costs, they have been evolving in line with our guidance as we balance cost discipline with a commitment to invest in our people, as well as to remain leaders in technology and digital infrastructure. The future requires us to be at the forefront of productivity enhancement, commercial effectiveness, and cybersecurity. On technology, it is worth highlighting that the deployment capability of our new cloud-based Core Banking System has strengthened our ability to innovate and capture new growth opportunities, including through open connectivity with AI agents. Our next challenge is to expand the deployment of AI across our organization. We already have several successes with agentic AI voice in use in our call center, with a target of 50% of calls by early 2027 from 25% currently, as well as for two-thirds of our digital interactions.
Lastly, as regards our capital, our CET1 ratio stood at 17.5% plus 20 basis points quarter-on-quarter post a 50 basis points quarterly payout accrual. We have 164 basis points in the nine months, equivalent to a steady 50 basis points per quarter pace. This impressive pace of accrual underlines NBG's strong capital generation capacity, also reflected in a leading return on assets of over 1.6%, despite having significant excess capital. Our capital position, another important competitive advantage, comprises excess capital of approximately 450 basis points, providing security during uncertain times while supporting vigorous organic growth, superior shareholder distribution, and strategic flexibility for value-accretive inorganic growth. Our approach to capital allocation remains disciplined and selective, prioritizing profitable organic growth alongside value-accretive opportunities that enhance our product offering and diversify our revenue streams.
Our bancassurance partnership with Allianz, as well as a commercial real estate partnership with Dromeus Capital, exemplify this strategy. In this context, our interim dividend of EUR 230 million, corresponding to a dividend per share of EUR 0.26 to be paid on the 20th of November, is higher by 18% compared to last year's, underscoring our commitment to increase consistently cash returns to our shareholders. To close, we are confident that combined with Greece's favorable structural growth prospects and our strong competitive positioning, we will deliver above our strategic targets on key profitability metrics in 2026 and continue to generate attractive, sustainable returns over time, creating long-term value for our shareholders, customers, and employees. With that, I would like to pass the floor to Christos, who will provide additional insight to our financial performance before we turn to Q&A. Christos?
Thank you, Pavlos. The first nine months of 2026 marked another period of strong financial performance for NBG, underpinned by accelerating NII growth in a favorable interest rate environment and sustained double-digit fee income expansion. As shown on slide 17, we delivered a profit after tax of EUR 1 billion before one-offs, translating into earnings per share of EUR 1.48, up 6% year-on-year. Return on tangible equity reached 15.7%, increasing to 20.7% when adjusted for excess capital, highlighting the substantial profitability upside embedded in our uniquely strong, low-leverage balance sheet as we progressively deploy liquidity and excess capital into organic and other value-accretive opportunities.
With the nine-month EPS comparing favorably with our full-year guidance of over EUR 1.4 and our return on tangible equity comfortably above our target of over 15%, we are firmly on track to exceed our full-year guidance on multiple KPIs, as illustrated on slide eight of our presentation, namely net interest income, net interest margin, cost-to-income ratio, earnings per share, and return on tangible equity, supported by accelerating core income dynamics, which are also expected to extend beyond 2026. Turning to the underlying drivers of our performance, NII growth accelerated to 6% quarter-on-quarter in Q3, as shown on slide 21, driving our quarterly net interest margin to 288 basis points, up 15 basis points quarter-on-quarter, benefiting from benchmark rates as well as lagged repricing of our assets and the full contribution from the strong credit expansion we delivered in Q2.
As a result, the nine-month NII increased by 5% year-on-year, already achieving our upgraded full-year guidance for mid-single-digit growth, with definite upside potential at year-end. The favorable forward interest rate trajectory, together with further repricing and our substantial corporate loan pipeline, provide visibility on strong credit expansion and NII momentum, reinforcing our confidence in delivering results that will exceed our current guidance. Complementing the accelerating NII performance, fee income maintained its strong growth trajectory, up 10% year-on-year, as shown on slide 28, outperforming our full-year guidance for high single-digit growth. Third-quarter fees remained close to the strong Q2 levels, despite the second-quarter base effects stemming from Maravet-related transactions and elevated capital markets activity. Retail fee generation has remained a key growth driver, benefiting from sustained demand for investment products.
This is evident in our mutual fund balances, which grew by over 40% year-on-year, delivering market share gains of circa 100 basis points year to date. Retail funds under management increased by nearly EUR 2 billion over the same period, as illustrated on slide 29. Going forward, we see significant untapped potential in asset management and bancassurance, offering substantial opportunity to scale up our fee income and further diversify our revenue base. Our strategic partnerships with Allianz in bancassurance and Dromeus Capital Group in real estate represent important steps in this direction, broadening our product offering, deepening customer engagement, and strengthening our capacity to generate recurring fee income over the next years.
Below our top line, our operating expenses increased by 8% year-on-year, as shown on slide 30, in line with our full-year guidance, reflecting our disciplined approach to cost management while sustaining targeted investments in people and technology. Personnel costs reflect the impact of union agreements alongside initiatives to attract and develop talent. G&As are driven by spending on initiatives aimed at enhancing customer experience and service quality, while depreciation charges reflect our sector-leading investments in technology and digital capabilities, including the migration to a new cloud-based Core Banking System. These investments have fundamentally strengthened our tech capabilities with an infrastructure that enhances operational efficiency, commercial effectiveness, digital capabilities, and cyber risk security.
Despite our class-leading investments in technology, our nine-month cost-to-income ratio stood at just 34.4%, among the lowest in Europe, demonstrating the efficiency of our current operating model and our ability to accommodate strategic investments while maintaining a highly competitive cost structure. As regards credit risk, NPE flows remained unaffected by ongoing uncertainty, confirming the quality of our balance sheet. Combined with sector-leading provision coverage by European standards, this continues to underpin a cost of risk below 40 basis points, in line with our guidance, reflecting sustained resilience. Turning to slide 19, our capital position remains a key competitive advantage, providing substantial strategic flexibility. Reflecting our solid profitability, capital generation continued strong in Q3, delivering a common equity Tier 1 ratio of 17.5%, 20 basis points higher quarter-on-quarter after absorbing shareholder distribution accruals.
In Q3, the fair value through OCI impact on our capital remained small despite considerable market volatility, given the predominantly held-to-maturity classification of our securities portfolio and our effective hedging strategy. Total capital ratio reached 21.2%, with our MREL ratio at 28.7%, well above the regulatory requirement of 26.9%. Confirming our commitment to increasing cash distributions, on November 20th, we are distributing an interim dividend of EUR 230 million, which translates into a dividend per share of circa EUR 0.26, 18% higher versus last year, and the highest in the domestic market. This distribution is testament to our disciplined and balanced capital deployment strategy, as outlined on slides 12- 14. That is, delivering compelling shareholder returns while preserving flexibility for investing in organic as well as other value-accretive opportunities that enhance our offering, broadening and diversifying our revenue streams.
Let's now go to the highlights of our balance sheet summarized on slide 18. Our performing loan book expanded by EUR 2.2 billion year-to-date, or 13% year-on-year, comparing favorably to our high single-digit growth target for the full year, despite the seasonal slowdown in lending activity during the third quarter and some early repayments in corporate segment, as shown on slide 23. Loan disbursements reached EUR 8 billion, up 28% year-on-year, driven by corporate credits across the energy, infrastructure, shipping, and tourism sectors, while retail loan origination also maintained a positive trajectory, as shown on slide 24, with disbursements increasing by 12% year-on-year to EUR 1.8 billion, contributing to a EUR 0.3 billion increase in retail exposures.
Building on the nine-month momentum, our solid approved not yet disbursed corporate loan pipeline of approximately EUR 2.5 billion provides visibility for an acceleration in lending activity in Q4, reinforcing our confidence in delivering our full-year loan expansion target of more than EUR 3 billion. On the liability side, deposits increased by 7% year-on-year, as shown on slide 25, driven by strong inflows of nearly EUR 4 billion year-on-year, most of which into our low-cost transactional household deposits. Time deposits also edged higher year-on-year, despite the targeted continued attrition to mutual funds. Our unique deposit franchise is a key comparative advantage, with low-cost core deposits comprising more than 80% of total deposits and unchanged despite higher rates. This favorable composition delivers a total funding cost below 70 basis points, as illustrated on slide 27, with the total deposit cost at 30 basis points, the lowest in the Greek banking sector.
Combined with the liquidity coverage ratio of 230%, among the highest in the euro area, and the loan-to-deposit ratio of 67%, our structurally superior funding profile provides the capacity required to support profitable growth. A few words on asset quality, illustrated on slides 31 and 32. Our NPE ratio of 2.4% reflects benign asset quality trends, as flows remain unaffected by uncertainty. The quality of our balance sheet and our leading coverage levels provide an additional layer of resilience, being a safeguard against potential risks. As we approach the end of 2026, NBG is in a strong position to capitalize on comparative advantages that distinguish us.
Our capital buffers, combined with substantial capacity for profitable balance sheet levering up, and the anticipated impact of our strategic transactions in bancassurance and real estate, provide meaningful upside to our future earnings and returns, which will be highlighted in February 2027 when we present our new business plan. Our class-leading investments in technology and the increasing deployment of AI across our organization are fundamentally enhancing our capabilities and long-term competitiveness. NBG is set to capture growth opportunities while maintaining the financial strength, discipline, and resilience that define our brand. We remain firmly committed to translating this potential into sustainable profitability and compelling shareholder value creation as we look into 2027 and beyond. With that, I would like to open the floor for questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Ben Caven-Roberts with Goldman Sachs. Please go ahead.
Evening. Thank you very much for the presentation and opportunity to ask questions. Just two follow-ups, please, on the NII moving parts. Firstly, on the net interest margin and then on volumes. Firstly, is there any more color you could provide on the lag in asset repricing you discuss? Specifically, how much of the loan book do you have yet to reprice onto the recent higher Euribor levels? How we should think about balancing that against spread erosion and potentially higher funding costs looking ahead? Secondly, on volumes, is there any extra color you could please provide on loan demand by sector and areas where the pipeline seems strongest as you look into Q4 and next year? Thank you.
Okay, thanks for the questions, Ben. On the repricing of our loan book, I would say that since the rate hike started in the second quarter of the year, we have seen our mostly floating loan book reprice gradually. I would say where we stand today, we have a pass-through of around 60%-70%, so there is more coming with regards to the rate hikes we had so far. You have to appreciate that given that the latest rate hike took place in September, there is some momentum still to come through in Q4. With regards to the tailwinds, you mentioned the spread erosion. As you may have seen, up to the nine months of the year, we have about 15, 16 basis points of spread compression.
I would assume that we could experience a bit more, up to 20 basis points, as we have guided in previous calls as well. With regards to loan demand, I think the sectors in which we expect loan growth to continue in the following quarters is more or less the same. We see growth, as I also expressed in my remarks, in the segments of energy, infrastructure, shipping, and tourism. I think this is what will drive growth going forward as well.
Thank you.
I think you also asked about our funding costs. As you see, our funding costs are resilient. The explanation for that is a mix. Given that more than 80% of our deposit base is core deposits, we have not seen much pressure on that respect.
Very clear. Thanks.
The next question comes from the line of Ben Maher with KBW. Please go ahead.
Hi. I've also got a question on the NII, more on the deposit side, please. I think in your slides, you mentioned you had a beta of 12%. I'm just interested how you see that evolving into next year, or if that's perhaps something we need to wait for the CMD in February for. And also just any color around deposit pricing. You obviously it ticked up a bit Q- on- Q. Where do you see kind of a terminal or like peak deposit rate potentially reaching as this, if we do go through another rate hiking cycle? Thank you.
Okay. The deposit beta that we have for total deposits, I don't see that moving by much because of the mix of our deposits. I think it's more relevant to discuss the time deposit beta, which in our book is a bit less than 50%, but that's where we see the beta being. Of course, it depends on how the rates will unfold in the future, but based on what we know now and the forward rates that we have, that's where we see things normalizing. And I think that's it.
Sorry, just a follow-up. I think if you can remind me of the rates, I think at 2.25 was the rate assumption for the 2026 guidance, if I remember correctly. Is that still the case? If you could also just remind us with the sensitivity, please, to the 25 basis points. Thank you.
The guidance that we have issued in June was based on deposit facility rate of 225, but given that this is history now and we already have higher Euribor and the DFR at 2.5%, we hence revised our guidance saying that we will beat the mid-single digit growth in NII going forward.
As a reminder, if you would like to ask a question, please press star and one on your telephone. As a final reminder, to register for a question, please press star and one on your telephone. The next question comes from the line of Andreas Souvleros with Eurobank Equities. Please go ahead.
Hello. Congratulations for the results and thank you for the presentation. I have one quick question is regarding the risk-weighted assets that I have noticed that have fallen from the EUR 41.8 billion- EUR 41.2 billion, so around EUR 600 million reduction. However, in the presentation, when you present the common equity one bridge, we see a negative, a drag from risk-weighted assets and other. How you can explain this?
Yeah. The explanation is some optimization we have run on our market risk-weighted assets, which is effectively grouped in the other column on our capital waterfall. We try to distinguish effectively growth through loans with any other optimizations that we do. That is the explanation for the reconciliation.
Is there something that you can expect also for the next quarter?
No, I think this is quarter-specific. It is not something that you should expect to see going forward.
Okay. Thank you very much.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you.
Well, thank you very much for joining us. I guess everyone was up all night watching the election, so not too many questions. But thank you very much for joining, and any further follow-ups you have that come to mind, please feel free to ask any of us. We will be on standby as usual, and we will see you in some upcoming conferences in European capitals. So, thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling.